Greetings, and welcome to Marcus & Millichap’s Fourth Quarter and Year End 2024 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Jacques Cornet. Thank you. You may begin.

Thank you, Operator. Good morning, and welcome to Marcus & Millichap’s fourth quarter and year end 2024 earnings conference call. With us today the President and Chief Executive Officer, Hessam Nadji and Chief Financial Officer, Steve DeGennaro. Before I turn the call over to management, please remember that our prepared remarks and the responses to questions may contain forward-looking statements. Words such as may, will, expect, believe, estimate, anticipate, goal and variations of these words and similar expressions are intended to identify forward-looking statements. Actual results can differ materially from those implied by such forward-looking statements due to a variety of factors, including but not limited to general economic conditions and commercial real estate market conditions, the company's ability to retain and attract transactional professionals, the company's ability to retain its business philosophy and partnership culture amid competitive pressures, the company's ability to integrate new agents and sustain its growth and other factors discussed in the company's public filings, including its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February, 28, 2024. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can make no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release, which was issued this morning and is available on the company's website, represents a reconciliation to the appropriate GAAP measures and explains why the company believes such non-GAAP measures are useful to investors. This conference call is being webcast. The webcast link is available on the Investor Relations section of the company's website at www.marcusmillichap.com, along with the slide presentation you may reference during the prepared remarks. With that, it's my pleasure to turn the call over to CEO, Hessam Nadji.

Thank you, Jacques. On behalf of the entire Marcus & Millichap team, good morning, everyone, and welcome to our fourth quarter and year-end earnings call. I'm pleased to report that we ended 2024 with our highest quarterly revenue in two years. Revenue for the fourth quarter was $240 million up 44% compared to last year with adjusted EBITDA of $18 million and net income of $8.5 million. For the year, revenue grew 8% to approximately $700 million and adjusted EBITDA of $9.4 million and net loss of $12 million While we're pleased to have narrowed the net loss from 2023’s market shock, returning to profitability is paramount and continues to drive key initiatives. During the quarter, brokerage revenue increased 40% with transaction count up 23% and volume growth of 41%. Our results reflected a definitive outperformance relative to the market increase of 6% in transaction count and 32% in volume as reported by RCA. Financing revenue nearly doubled in the fourth quarter and volume was up 139% due to our team's further penetration into larger transactions and the expansion of our IPA Capital Markets Group. To illustrate our progress, consider that our previous quarterly record prior to the 2022 market disruption was just over $36 million. In the fourth quarter of 2024, we achieved $31 million of revenue despite a still challenging lending environment. Another contributing factor was our originators access to lenders. MMCC closed with 177 separate lenders in the quarter and 367 for calendar 2024, which was a key catalyst for these improved results. Three key factors drove our higher than expected results during the fourth quarter. The first was the dramatic drop in the ten-year treasury yield to a low of 3.6% in September, following the Fed's decisive 50 basis point interest rate reduction. This window of…

Thank you, Hessam. As mentioned, revenue for the fourth quarter was $240 million up 44% compared to last year's $166 million. For the full year, total revenue was $696 million up 8% compared to $646 million last year. The significant year-over-year and sequential revenue growth in the fourth quarter was driven by low rates when the Fed initially began to make cuts in September and buyers incentive to close in the quarter before rate locks expired. Revenue from real estate brokerage commissions for the fourth quarter was $203 million compared to $145 million last year, an increase of 40%. For the quarter, sales volume was $12.3 billion across 1742 transactions, up 41% and 23% respectively. For the full year 2024, revenue from real estate brokerage commissions was $590 million compared to $560 million last year, an increase of 5%. Full year sales volume was $33.6 billion across 5,447 transactions, up 9% and essentially flat respectively. Average transaction size during the fourth quarter was approximately $7 million compared to $6.2 million a year ago. For the year, average transaction size was $6.2 million compared to $5.6 million in the prior year. Increases in average transaction size for both the quarter and full year are due to a greater mix of revenue coming from middle market and larger transactions as institutional investors re-entered the market starting in the third quarter. Within brokerage for the quarter, our core private client business contributed 59% of brokerage revenue or $120 million versus 66% or $95 million last year. For the full year, the Private Client business contributed 62% of brokerage revenue or $366 million versus 67% or $373 million last year. Middle market and larger transactions together accounted for 38% of brokerage revenue or $77 million during the fourth quarter compared to 31% last year.…

Thank you. At this time, we'll be conducting a question-and-answer session. Thank you. Our first question is from the line of Jason Belcher with Wells Fargo. Please proceed with your questions.

Good morning. Hassan, just wondering if you can talk a little more about the different transaction size buckets for commission revenue, maybe touch on any notable changes in the types of buyers and sellers you're seeing or any specific changes in transaction terms you might have seen since the election or maybe even since the start of the new year?

Happy to Jason, good morning. Well, the biggest trend that should be highlighted is the continuation of capital coming into the larger transactions. We saw that start the middle of last year and it's built further momentum. That's the combination of institutional capital actively looking for acquisition opportunities, looking at replacement costs and price versus the 2022 peak as the two main catalysts for why they are much more engaged in the marketplace today. The second reason behind that is a lot of entrepreneurial private investors that are also back in the market looking at some higher risk, higher return types of acquisitions. We're seeing some of that in the office sector. We are certainly seeing some of that in the shopping center sector and even some multifamily older vintage multifamily that a lot of institutions would stay away from, but private entrepreneurial investors would actually embrace that need either rescue capital or capital for deferred maintenance and so on within the older vintage workforce housing type of Class B and C assets. Other trend to note is that we are seeing new capital formation. There are new groups in just about every major metro that are actively now looking for acquisition opportunities, as well as a lot of our existing clients that we've done business with over the years being far more motivated by the fear of missing out frankly than being concerned about the fear of ongoing uncertainties. So the investor sentiment has definitely shifted. I would say that the election outcome helped that investor sentiment. But then in the last 30, 45 days, we've seen a little bit more of a pullback, just wait and see how the new administration's policies start to roll out and what really happens on the inflation front. Of course, we didn't get a friendly tape just a couple of days ago and that's the kind of concern that keeping some investors on the sideline. Mostly on the seller side of the equation, as I mentioned in my comments, number of our clients that were planning to bring product out to market have decided to hold-off for just a bit. Having said all that, we're seeing incredible demand on the buy side and just a more cumulative need to sell or desire to sell now that we pretty much know that the kind of the baseline threshold for interest rates is going to be in that 4.25% to 4.75% range much more so than 3.5% to 4% at least in the foreseeable future.

That's very helpful. Thank you for all that color. Shifting gears a little bit, wondering if you could talk a little bit about your exposure to the Greater LA market and what kind of impact you've seen from the recent fires there, especially as it relates to the multifamily transactions. Do you have any sense how much multifamily rents have increased or are expected to increase in the Greater LA area?

Well, the wildfires were tragic in the way that the community was affected. Of course, we directly know countless displaced friends, associates and related people to our business that really have required a lot of support and we're glad to do our part to make that happen. From a market impact point of view, there are multiple ripple effects. The first and foremost at a more macro level is insurance, of course. We continue to have a lot of pressure on operating costs, not only insurance becoming a lot more expensive, it is just very hard to get policies issued, written and that has become a major obstacle in the local market. California is a big market for us. Southern California is a significant market for us. And part of the reason that the Q1 kind of pipeline is a little bit slower than it would have been has to do with some inventory being pulled from the market and more clients hesitating to bring product to market to see what happens. At a macro level, of course, that has an impact on the company, but not to any measurable way that would be of any concern. From a rebuilding perspective, there is where there is some direct correlation between market sentiment and some of the discussions around tariffs, materials costs, labor costs and frankly concerns around the local government's ability to organize a rebuilding effort, which is obviously going to be fraught with all kinds of obstacles and issues. It is creating a lot of pressure on rents. I'm not so convinced that that is sustainable and it's going to kind of reset the benchmark for rent growth in Southern California. It is definitely near term increase, but questionable as to where those increases are going to be sustainable beyond the near-term, the reaction to the tragedies. At the same time, I have to say California in general and Southern California in particular is being viewed by the investment community as a bit of a diamond in the rough because these metros are hugely supply constrained and the tragedies make that even more acute. At the same time, that lagged in the recovery compared to many other metros and we are just getting the momentum on job creation, rent growth and that has made the apples-to-apples comparison of a lot of California investments including Northern California by the way, much more attractive on a risk adjusted basis prior to the tragedy. I don't think that that's going to be affected much. The macro view is still very favorable toward how pricing has reacted and why there is some attractive opportunities as an entry point throughout California.

Thank you. Thank you for all of that. I guess, you guys have referenced exploring some external growth opportunities as well as other strategic initiatives on technology or talent recruiting and development. Any discussions on the external growth front or strategic initiatives internally that you could share more on specifically?

Yes, it's a bit frustrating in that there are groups out there we've been actively talking to and have made offers to that would have been great strategic fits for us and we would have been a great growth platform for them. And the near-term concerns around performance, obviously profitability is very important to us and being able to acquire entities that are accretive and value added pretty much from the get go is an important consideration for us. So valuation has been a little bit of the obstacle as has been the terms of what the sellers had been expecting in guaranteed value versus our comfort zone. But those discussions are still ongoing in a couple of cases. And in retrospect, some of the deals that we've passed on have turned out to be really good decisions to be direct about it because of the market uncertainty outweighing, our desire to just grow and bring entities into the MMI platform. And looking forward, we are not giving up on those kinds of targeting and approaches of actual companies and platforms. In the meantime, we continue to have a lot of success in attracting experienced individuals and teams that are joining the firm at a pretty steady flow. We are adding resources to continue to build on that momentum. And another channel of investment and diversification for us has been partnering with other firms and investing in some other firms that we believe are very complementary to our platform and to our clients. Examples that I've highlighted before are equity multiple, which is essentially a very well established tech heavy platform for raising equity and investment management, which has become a really good source of solutions for many of our clients and we have introduced them to many of our agents. They're a good partner in that arena for us and growing in that channel. Archer is another example of a really an AI oriented startup that is a data consolidator and basically a platform for modeling net operating incomes and property profiles and submarket profiles that can make our underwriting broker opinions of value and client basically, probability assessment much, much more efficient. So not only are we going after core business investment opportunities and acquisitions, adjacent business line acquisition opportunities, but also in terms of investments in technology oriented outfits that can be complementary to the business. Organically, we've grown the auction business from scratch in the last 2.5 years coming up on 3 years very successfully. Our acquisition and integration of Mission Capital, which brought a very well respected brand within the loan sale and loan advisory business has been very successful, especially as the cycle turns to where a lot of lenders and investors are selling loan pools and need our advice on valuing those. So, there's just a variety of examples of how we've already added complementary functions to the firm and are using our strong balance sheet to continue to pursue them.

Thanks for that update Hessam. Maybe just one for Steve as well, switching gears to capital allocation. It looks like Q4 was a kind of a quieter quarter on the share repurchase front. Maybe you could talk a little about how you think about balancing the different capital allocation buckets going forward in terms of share repurchase versus dividend growth versus other investment opportunities?

Yes, Jason happy to take that. And you touched on the fact that our strategy as you would imagine is multi-pronged. It's not only investments for long-term growth in technology, M&A, dividends and share repurchases. We were a little bit quiet on the repurchase side, although continued to distribute dividends. We continued our pattern of semi-annual dividend declarations, paid that in October. The Board just earlier in the week announced a dividend coming up here for the first quarter. As we look at how we make those allocation decisions, we dial them up, dial up and down opportunistically, specifically as it relates to repurchases. I think, we said this last quarter, at a time when we are not generating as much cash flow, we'll be a little bit more opportunistic in how we engage in repurchasing shares. And although we did generate quite a bit of operating capital this quarter, so we'll revisit that and of course the dividends are I would expect that pattern to continue although that's up to the Board to decide on a periodic basis. But importantly, we continue to invest very, very heavily internally in technology. I think Hessam mentioned investments in our central support functions, which is a way to generate efficiencies across underwriting and proposal preparation and marketing for our agents, pulling that back into a central function. So heavy investment there over the last two years and we're really starting to see the fruits of those investments.

Great. Thanks very much for taking my questions.

Thanks, Jason.

Thanks, Jason.

Thank you. There are no further questions at this time. I would like to turn the floor back to management for closing remarks.

Thank you, operator, and thank you everyone for joining our call. We look forward to seeing many of you on the road and to have you back on our next quarterly update. The call is adjourned.

Thank you. This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.